Chori’s Issue 1 – Low valuation | Increase both Chori’s and Toray’s shareholders’ value
What we hope Tosho to improve the shareholders’ value as a shareholder are
1) Increase the value of the overall Toray Group by increasing shareholder value of Chori and
2) Improve corporate governance

Chori’s Issue 1 – Low valuation

 Over the last 5-years Chori’s PBR has generally maintained an average below 1x.
 The fact that PBR is less than 1x means that degree to which capital is how efficiently used (ROE) is lower than the expected return (cost of equity) required by shareholders.*
 *Assumption based on an equity spread based approach where the lower the ROE relative to the cost of equity, the lower the PBR.

(Source:QUICK Astra Manager)

 Chori’s equity capital has grown significantly compared to before the Global Financial Crisis in 2008. On March 2005, the equity capital 15.5 billion yen, but as of March 31, 2020 had increased to 57.2 billion yen (to an equity ratio of 50%). As a result, ROE has dropped from around 20% to around 10%.
 The reason for the decline in ROE is (1) a capital allocation policy where the majority of net income accumulates as equity due to a low dividend payout ratio and (2) an inability to increase net income compared to the accumulation of equity.

(Source:QUICK Astra Manager)

TOPIC:Early completion of Mid-Term Management Plan

 Chori announced a 3-year plan in April 2017 ending in fiscal 2019. The plan was conservative, aiming only for the same level of ROE as FY2016. However, despite meeting the target in FY2018, no adjustment was made for FY2019.

(Source:Based on information from Chori’s Website)

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